How Divorce Affects Your Retirement

The prevalence of so-called "gray divorce" is increasing: more and more people are choosing to divorce in their fifties, sixties, and even beyond. They may have stayed together "for the sake of the children" and decided to part once the children were grown and flown. Or they may not have realized how little they had in common while they were raising kids, only to have their differences thrown into sharp focus when the nest emptied. Or they may have chosen to divorce for any one of a hundred different reasons, including that they simply believed they would be happier single.

Whatever the reason for their divorce, many people in their fifties and sixties pay more attention to why they want a divorce, and less to how it will affect them financially. Unfortunately, especially for women, that's a big mistake.

Divorce's Financial Impact on Older Women

When you divorce in your thirties or early forties, you have decades ahead of you in which to build your financial future as a single person. You're just hitting your stride in your career, and you have a lot of time to make investments and allow them to grow.

By contrast, imagine a 55 year old woman who is contemplating divorce, or whose spouse has just asked for one. Like many baby boomer women, she might be part of the "opt-out revolution" who took years out of the workforce to stay at home and raise her kids. At the time it seemed like a good decision. She and her husband agreed they didn't want their children raised by strangers. Her husband made more money, and they were a partnership. Staying home was her contribution.

By the time she tried to get back into the workforce ten or fifteen years later, her skills were outdated, and the gap in her resume hard to overcome. Not only had she lost income and retirement savings in her years out of the workforce, her earning potential for the remainder of her working life had been drastically reduced. And now, with less income, her living expenses as a single person will go up, since she'll be solely responsible for them. This double-whammy throws many older divorcees into poverty, or forces them to work far longer than they had planned to in order to make ends meet.

This scenario is supported by research from the National Center for Family & Marriage Research. According to their data, the poverty rate is very low, only 3.4%, for married Americans over age 62 who never divorced. In comparison, they found that 16% of single people who divorced prior to age 50 live in poverty, while 19% of single people who divorced after age 50 are poor. In addition to the factors above, how Social Security benefits are accumulated and paid contributes to this outcome.

Planning Financially for How a Gray Divorce Affects Retirement

If you're in your fifties or sixties and thinking about divorce, the message here is not that you should stay put in an unhappy marriage. Rather, you should develop an understanding of the financial realities facing you and get the best possible legal help to improve your situation.

You should realize that you have probably earned the right to, and may need, spousal maintenance. It's possible that you will be entitled to a higher percentage of marital assets than you expect, especially if your spouse owns a small business or if you expect to have a high-asset divorce. In any case, you will want to have a divorce attorney who is not just sensitive to your legal needs, but to your financial situation as well.